Razuki v. Amguard Insurance Company

• Court: District Court, S.D. California
• Decided: March 18, 2024
• Docket: 3:21-cv-01983
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 SALAM RAZUKI, Case No.: 21-cv-01983-AJB-DEB Plaintiff, 12 ORDER GRANTING DEFENDANT 13 v. AMGUARD INSURANCE COMPANY’S MOTION FOR 14 AMGUARD INSURANCE COMPANY; SUMMARY JUDGMENT AND 15 BERKSHIRE HATHAWAY GUARD CLOSING CASE INSURANCE COMPANIES; and DOES 16 1 through 10, inclusive. (Doc. No. 43) 17 Defendants.

18 Before the Court is Defendant AmGUARD Insurance Company’s (“AmGUARD” 19 or “Defendant”) motion for summary judgment on Plaintiff Salam Razuki’s (“Plaintiff”) 20 First Amended Complaint. (Doc. No. 43.) Plaintiff filed an opposition, to which Defendant 21 replied.1 (Doc. Nos. 50, 51.) For the reasons set forth below, the Court GRANTS 22 Defendant’s motion. 23 I. BACKGROUND 24 Defendant issued an insurance policy to Plaintiff, effective from February 15, 2020 25 to February 15, 2021, providing coverage to a multi-tenant commercial building 26

27 1 In its reply brief, Defendant requests the Court strike Plaintiff’s opposition as untimely. The Court has already ruled that based on Plaintiff’s counsel’s represented medical condition, there was good cause to 28 1 (“Property”). (Doc. No. 43-1 at 13, 14.) On October 11, 2020, a fire occurred at the 2 Property (“the Loss”). (Id. at 132.) Plaintiff notified Defendant of the Loss and sought 3 Policy coverage of the damage to the Property. (Id.) 4 Thereafter, one of Defendant’s claims professionals communicated with Plaintiff 5 and informed him that an independent adjuster would assist Defendant in the coverage 6 investigation, and issued Plaintiff a $50,000 check as an advance for the damage to the 7 Property. (Id. at 134, 135, 137.) After the investigation, Defendant denied Plaintiff’s 8 coverage request pursuant to the Policy’s Protective Safeguard Endorsement (“PSE”). (Id. 9 at 168.) The PSE contained a condition, requiring Plaintiff to maintain the protective 10 safeguard listed in the Schedule as “P-1.” Under the PSE, P-1 is defined, in relevant part, 11 as: 12 “P-1” Automatic Sprinkler System, including related supervisory services. Automatic Sprinkler System means: 13 a. Any automatic fire protective or extinguishing system, including 14 connected: (1) Sprinklers and discharge nozzles; 15 (2) Ducts, pipes, valves and fittings; 16 (3) Tanks, their component parts and supports; and (4) Pumps and private fire protection mains. 17

18 (Id. at 57 (emphasis in original).) 19 Plaintiff filed suit against Defendant in San Diego Superior Court, and Defendant 20 removed the case to federal court. (Doc. No. 1.) The First Amended Complaint is the 21 operative complaint. (Doc. No. 10.) In it, Plaintiff raises claims for: (1) breach of contract, 22 (2) breach of implied covenant of good faith and fair dealing, (3) declaratory relief, (4) 23 fraud, and (5) violation of California Business and Professions Code Section 17200 (“UCL 24 claim”). (Id.) In a prior order, the Court dismissed Plaintiff’s fraud and UCL claims.2 25 Defendant’s motion for summary judgment on the remaining claims follows. 26 27 2 The Court afforded Plaintiff time to amend his fraud and UCL claims, but he did not do so. (Doc. No. 28 1 II. LEGAL STANDARD 2 Summary judgment is appropriate under Federal Rule of Civil Procedure 56 if the 3 moving party demonstrates the absence of a genuine issue of material fact and entitlement 4 to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).3 A fact 5 is material when, under the governing substantive law, it could affect the outcome of the 6 case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine if 7 the evidence is such that a reasonable jury could return a verdict for the nonmoving 8 party. Id. The party seeking summary judgment bears the initial burden of establishing the 9 absence of a genuine issue of material fact. Celotex Corp., 477 U.S. at 323. Once the 10 moving party has satisfied this burden, the nonmoving party must “go beyond the pleadings 11 and by [his] own affidavits, or by the depositions, answers to interrogatories, and 12 admissions on file,” to show that a genuine issue of disputed fact remains. Id. at 324. “In 13 judging evidence at the summary judgment stage, the court does not make credibility 14 determinations or weigh conflicting evidence.” Soremekun v. Thrifty Payless, Inc., 509 15 F.3d 978, 984 (9th Cir. 2007). “Rather, it draws all inferences in the light most favorable 16 to the nonmoving party.” Id. 17 III. DISCUSSION 18 Defendant seeks summary judgment, arguing that Plaintiff cannot prove his 19 remaining claims for breach of contract, breach of implied covenant of good faith and fair 20 dealing, and declaratory relief based on an alleged wrongful denial of coverage. Defendant 21 contends that it correctly denied Plaintiff’s request for coverage because the Property was 22 not equipped with an automatic sprinkler system at the time of the Loss as expressly 23 required by the PSE. Plaintiff asserts that Defendant should be precluded from arguing the 24 PSE exclusion based on waiver and estoppel, and even if it is not, the meaning of 25 “automatic sprinkler system” is ambiguous, and the ambiguity should be resolved in his 26 favor. 27 3 Internal quotations, citations, and alterations are omitted from the cases cited in this Order unless 28 1 A. Evidentiary Objections 2 To begin, the Court addresses Plaintiff’s evidentiary objections to Melinda 3 Champluvier’s (“Champluvier”) declaration filed in support of Defendant’s summary 4 judgment motion. Plaintiff raises a blanket objection to all 13 paragraphs in Champluvier’s 5 declaration based on “[l]ack of foundation; vague; ambiguous; overbroad; lack of personal 6 knowledge; hearsay, and material cited cannot be presented in a form that would be 7 admissible in evidence.”4 (Doc. No. 50 at 18–20.) The only argument Plaintiff provides in 8 support of his broad objection is that Champluvier is not qualified to testify about 9 AmGUARD’s documents because she “has no personal knowledge regarding the actions 10 and omissions of AmGUARD in this matter, and no personal knowledge regarding how 11 AmGUARD’s records are made and maintained.” (Id. at 7.) Plaintiff offers no explanation 12 for the rest of his objections. Thus, the Court overrules them as inadequately supported. 13 See generally Burch v. Regents of Univ. of California, 433 F. Supp. 2d 1110, 1124 (E.D. 14 Cal. 2006) (declining to comb through documents to identify potential evidentiary issues 15 “all without guidance from the parties.”); 10B Fed. Prac. & Proc. Civ. § 2738, Affidavits 16 in Support of or in Opposition to Summary Judgment (4th ed.) (“[A] motion to strike 17 should specify the objectionable portions of the affidavit and the grounds for each 18 objection. A motion asserting only a general challenge to an affidavit will be ineffective.”) 19 As to Plaintiff’s lack of personal knowledge objection, the Court overrules it as well. 20 Champluvier’s declaration makes clear that in her capacity as a Property Claims Manager 21 for Defendant, she is familiar with AmGUARD’s investigation of Plaintiff’s insurance 22 claim concerning the fire at the Property, and has access to the Policy issued to Plaintiff, 23 notices issued to Plaintiff in relation to the Policy, and claim file materials concerning 24 Plaintiff’s request for coverage. (Doc. No. 43-1 at 2–3.) Champluvier also states that the 25 26

27 4 To the extent Plaintiff objects to Champluvier’s declaration based on credibility, the argument is unavailing. “In judging evidence at the summary judgment stage, the court does not make credibility 28 1 company records described in her declaration “were prepared in the regular course of 2 business at or near the time of the acts, conditions or events recorded.” (Id. at 3.) 3 Based on the foregoing, the Court finds that Champluvier has sufficient personal 4 knowledge grounded in her own observations and experience as a Property Claim Manager 5 to testify about the company records referenced in her declaration.5 See United States v. 6 Whittemore, 776 F.3d 1074, 1082 (9th Cir. 2015) (“Personal knowledge includes opinions 7 and inferences grounded in observations and experience.”). And in any event, the 8 underlying company records on which the Court relies in reaching its decision on summary 9 judgment, as more fully discussed below, could be provided in an admissible form at trial, 10 such as via the business records exception to the hearsay rule. See JL Beverage Co., LLC 11 v. Jim Beam Brands Co., 828 F.3d 1098, 1110 (9th Cir. 2016) (At summary judgment, “a 12 district court may consider hearsay evidence submitted in an inadmissible form, so long as 13 the underlying evidence could be provided in an admissible form at trial[.]”). See also 14 Federal Rules of Evidence, Rule 803(6); United States v. Ray, 930 F.2d 1368, 1370 (9th 15 Cir. 1990), as amended on denial of reh’g (Apr. 23, 1991) (A qualified witness for purposes 16 of Rule 803 “is broadly interpreted to require only that the witness understand the 17 record-keeping system.”). Accordingly, all of Plaintiff’s objections are OVERRULED. 18 B. Waiver and Estoppel 19 Turning to the parties’ substantive arguments on summary judgment, Plaintiff argues 20 that Defendant is precluded from arguing the PSE exclusion based on waiver and estoppel 21 because AmGUARD failed to inspect the Property before the Loss, paid Plaintiff a $50,000 22 advance for the damages with no reservation of rights, and continued to insure the Property 23 despite knowing of the sprinkler issue. Plaintiff, however, offers no further explanation as 24 to how these circumstances necessarily establish his waiver and estoppel claims. See Gaunt 25 26 5 The underlying company records would also be admissible at trial under the business records exception 27 to the hearsay rule. See Federal Rules of Evidence, Rule 803(6); United States v. Ray, 930 F.2d 1368, 1370 (9th Cir. 1990), as amended on denial of reh’g (Apr. 23, 1991) (A qualified witness for purposes of 28 1 v. Prudential Ins. Co. of Am., 62 Cal. Rptr. 624, 627 (Cal. Ct. App. 1967) (“It is 2 fundamental that the burden of proving estoppel or waiver rests upon the party in whose 3 favor those doctrines are claimed to inure.”). Tellingly, he devotes just three sentences in 4 his opposition brief to these claims, one containing an inaccurate statement of law and two 5 containing the aforementioned conclusory statements. 6 As Defendant points out, under California law,6 “[t]he rules governing the 7 application of the doctrines of estoppel and waiver in the context of insurance coverage are 8 well established.” Dollinger DeAnza Assocs. v. Chicago Title Ins. Co., 131 Cal. Rptr. 3d 9 596, 611 (Cal. Ct. App. 2011). And instructive here, “[i]t is the general and quite well 10 settled rule of law that the principles of estoppel and implied waiver do not operate to 11 extend the coverage of an insurance policy after the liability has been incurred or the loss 12 sustained.” Id. (collecting cases). In other words, “the principles of estoppel and implied 13 waiver cannot operate to create insurance coverage where none exists under the plain terms 14 of the operative policy.” Udinsky v. State Farm Fire & Cas. Co., No. 18-CV-03994-JSC, 15 2019 WL 1017606, at *11 (N.D. Cal. Mar. 4, 2019). Despite being on notice of case law 16 contrary to his waiver and estoppel claims, Plaintiff made no attempt to distinguish or 17 otherwise address it. 18 The only authority Plaintiff cited in support of his position is Garamendi v. Golden 19 Eagle Ins. Co., 10 Cal. Rptr. 3d 724 (Cal. Ct. App. 2004). He fails, however, to explain 20 why the case is applicable or provide even a pinpoint page citation to the portion of the 21 decision that supports his claim. In any event, the Court’s review of the case reveals it is 22 inapposite because, unlike this case, Garamendi involves a liability insurer, and “only 23 liability insurers are subject to an exception” to the rule that estoppel and waiver principles 24 do not apply in the insurance context. Dollinger DeAnza Assocs., 131 Cal. Rptr. 3d at 612. 25 The same exception does not apply here, and Plaintiff made no effort to show otherwise. 26 27

28 1 Moreover, Defendant had no duty to inspect the Property prior to the Loss, the 2 issuance of a partial payment that an insured is otherwise not entitled to under the insurance 3 policy does not constitute a waiver, and Defendant had no obligation to cancel the Policy 4 after denying coverage. See Am. Way Cellular, Inc. v. Travelers Prop. Cas. Co. of Am., 5 157 Cal. Rptr. 3d 385, 394 (Cal. Ct. App. 2013) (“[A]n insurer does not have the duty to 6 investigate the insured’s statements made in an insurance application and to verify the 7 accuracy of the representations. . . Rather, it is the insured’s duty to divulge fully all he or 8 she knows.”); Udinsky v. State Farm Fire & Cas. Co., No. 18-CV-03994-JSC, 2019 WL 9 1017606, at *9 (N.D. Cal. Mar. 4, 2019) (claims adjuster’s granting of partial payment to 10 plaintiff based on a mistaken assumption “does not constitute a waiver”). Plaintiff’s 11 conclusory assertion that these facts establish waiver and estoppel is not enough to defeat 12 summary judgment. See Hernandez v. Spacelabs Med. Inc., 343 F.3d 1107, 1112 (9th Cir. 13 2003) (noting that a plaintiff cannot prevail against a summary judgment motion “with 14 unsupported conjecture or conclusory statements”). 15 Accordingly, because Plaintiff has not presented adequate authority or evidence to 16 substantiate his waiver and estoppel claims, he has not carried his burden to prove waiver 17 or estoppel. See Gaunt, 62 Cal. Rptr. at 627. 18 C. PSE Exclusion 19 As previously mentioned, Defendant argues that Plaintiff’s breach of contract and 20 related claims fail because pursuant to the PSE, coverage under the Policy is conditioned 21 upon the maintenance of an operational automatic sprinkler system, and the Property was 22 not equipped with such a system. Plaintiff counters that the phrase, “automatic sprinkler 23 system,” is ambiguous because it can reasonably include an Ansul System, which the 24 Property had at the time of the Loss, and thus, Defendant wrongfully denied coverage. 25 Insurance policies are contracts, and contract interpretation is a question of law. See 26 Waller v. Truck Ins. Exch., Inc., 900 P.2d 619, 627 (Cal. 1995). A court’s interpretation of 27 a contract “must give effect to the mutual intention of the parties” at the time of formation. 28 Id. If possible, such intent must be inferred “solely from the written provisions of the 1 contract.” Id. “The clear and explicit meaning of these provisions, interpreted in their 2 ordinary and popular sense, unless used by the parties in a technical sense or a special 3 meaning is given to them by usage, controls judicial interpretation.” Id. A policy provision 4 is ambiguous “when it is capable of two or more constructions, both of which are 5 reasonable.” Id. Language in a contract, however, “must be interpreted as a whole, and in 6 the circumstances of the case, and cannot be found to be ambiguous in the abstract.” Id. 7 “Courts will not strain to create an ambiguity where none exists.” Id. 8 Additionally relevant here, a condition precedent “refers to an act, condition or event 9 that must occur before the insurance contract becomes effective or binding on the parties.” 10 American Way Cellular, Inc. v. Travelers Property Cas. Co. of America, 157 Cal. Rptr. 3d 11 385, 396 (Cal. Ct. App. 2013). “Conditions neither confer nor exclude coverage for a 12 particular risk but, rather, impose certain duties on the insured in order to obtain the 13 coverage provided by the policy.” Id. 14 According to the PSE, as a condition to obtaining coverage, Plaintiff was required 15 to maintain within the Property at the time of the Loss, the protective safeguard listed in 16 the Schedule as “P-1.” (Doc. No. 43-1 at 57.) That provision is defined in the PSE, in 17 pertinent part, as: 18 “P-1” Automatic Sprinkler System, including related supervisory services. Automatic Sprinkler System means: 19 a. Any automatic fire protective or extinguishing system, including 20 connected: (1) Sprinklers and discharge nozzles; 21 (2) Ducts, pipes, valves and fittings; 22 (3) Tanks, their component parts and supports; and 23 (4) Pumps and private fire protection 24 mains.

25 (Id. (emphasis in original).) Plaintiff contends that at the time of the Loss, the Property had 26 an Ansul System, and such a system can be reasonably interpreted as a P-1 automatic 27 sprinkler system because it is an automatic fire extinguishing system that includes ducts. 28 The Court disagrees. 1 Notably, Plaintiff’s interpretation would render redundant another provision in the 2 PSE—namely, P-9G which is expressly defined as an “Automatic Commercial Cooking 3 Extinguishing System (a/k/a Ansul system)”. (Id. at 58.) Because the two types of systems 4 are differentiated in the endorsement as separate categories with distinct identifying 5 symbols (P-1 and P-9G), and the PSE at issue identifies only P-1 as the applicable 6 safeguard, the Court finds that the contract, interpreted as a whole and in the circumstances 7 of the case, does not support an interpretation of P-1 that includes an Ansul System. 8 Adopting Plaintiff’s interpretation would render meaningless the P-9G category. Under 9 established contract principles, the Court declines to apply an interpretation that would 10 create this result. See AIU Ins. Co. v. Superior Ct., 799 P.2d 1253, 1268 (Cal. 1990) (“It is 11 a very fundamental principle that policy language be so construed as to give effect to every 12 term.”); Union Oil Co. v. Int’l Ins. Co., 44 Cal. Rptr. 2d 4, 7 (Cal. Ct. App. 1995) (“an 13 interpretation that gives effect to every clause is preferred over one that would render other 14 policy terms meaningless”). 15 Moreover, the Court observes that the PSE, as a whole, lists five categories of 16 safeguards, each of which contain different items and definitions. P-1 covers automatic 17 sprinkler systems, P-2 covers automatic fire alarms, P-3 covers security service, P-4 covers 18 service contracts with private fire departments, and P-9G covers automatic commercial 19 cooking extinguishing systems “(a/k/a Ansul System)”. (Doc. No. 43-1 at 57–58.) The 20 Court finds that this differentiated grouping further supports a finding that each category 21 is considered a distinct system not to be conflated with the other. See Cal. Civ. Code § 1641 22 (“The whole of a contract is to be taken together, so as to give effect to every part, if 23 reasonably practicable, each clause helping to interpret the other.”) Because the express 24 terms of the PSE required Plaintiff to maintain a P-1, not a P-9G safeguard, and each are 25 considered separate and distinct systems under the contract, the Court does not find it 26 reasonable for Plaintiff to expect that he satisfied his obligation to maintain a P-1 system 27 by maintaining a P-9G system. 28 1 Plaintiff ignores that his interpretation would render another provision in the PSE a 2 mere surplusage, and instead, points to his expert’s opinion that P-1’s definition for 3 automatic sprinkler system is vague and ambiguous, as well as Defendant’s expert’s 4 understanding of a sprinkler system. (Doc. Nos. 50 at 11–12; 50-1 at 2–3.) An expert’s 5 testimony, however, cannot be used to provide legal meaning or interpret a policy as 6 written. McHugh v. United Serv. Auto. Ass’n, 164 F.3d 451, 454 (9th Cir. 1999) (deeming 7 irrelevant an expert’s “legal conclusions as to what conditions were covered or excluded 8 under the terms of the policy”). Plaintiff’s arguments in this regard are therefore without 9 merit. 10 Based on the foregoing, the Court finds that the P-1 Automatic Sprinkler System 11 definition in the PSE is unambiguous in that it cannot be reasonably interpreted to include 12 the Ansul System explicitly defined in another provision. Because an Ansul System does 13 not satisfy Plaintiff’s obligation to maintain an automatic sprinkler system within the 14 meaning of P-1, Defendant correctly denied his request for coverage for failure to satisfy 15 the condition precedent. Accordingly, the Court grants Defendant’s summary judgment 16 motion on this basis. 17 IV. CONCLUSION 18 For the reasons stated herein, Defendant is entitled to summary judgment on 19 Plaintiff’s claims for breach of contract, breach of implied covenant of good faith and fair 20 dealing, and declaratory relief. Accordingly, Defendant’s motion for summary judgment is 21 GRANTED. 7 22 Lastly, the Court notes that Berskshire Hathaway Guard Insurance Companies 23 (“Berkshire”) presently remains a defendant in this case. AmGUARD’s pleadings indicate 24 that Plaintiff erroneously sued Berkshire in this action. Plaintiff does not dispute this. 25 26 7 The Court acknowledges Defendant’s request for judicial notice of Exhibits 16, 17, and 18 in support of 27 its summary judgment motion. (Doc. No. 43-3.) Because the Court reached its summary judgment ruling without reliance on these documents, however, the Court need not consider the request and denies it as 28 | || There being no appearance from Berkshire and no dispute that such defendant was included 2 || erroneously, Berkshire is DISMISSED WITHOUT PREJUDICE from this action. 3 The Clerk of Court is instructed to enter judgment accordingly and close this case. 4 IT IS SO ORDERED. 5 || Dated: March 18, 2024

7 United States District Judge 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 At nanon □□□□□□□□□□□□